Museum and Historical Association State Budget Cuts--Case Study

Louise Wilson was the executive director of the State Historical and Museum Association, a four-employee nonprofit organization. Betty was the bookkeeper and administrative assistant who did double duty by answering the telephones. Kevin Peters, calling in from the State Capitol, was the communications and government relations professional. The only other employee of the association, Bill Stevens, was an historian who had museum management experience with a large art museum in Philadelphia.

While Louise spent most of her time keeping her 15-member board happy and working with the consultant fundraiser, Bill provided management and other technical assistance to the 67 museums and historical associations that were dues-paying members. In addition to being the association’s registered lobbyist, Kevin also maintained the organization’s Web site, produced the monthly newsletter, and issued press releases.

All four employees, along with a small cadre of committed volunteers and an occasional summer intern, participated in planning fundraisers, preparing for board meetings, and sorting the bulk mail for the newsletters. Some services, such as the bulk mail tasks for the newsletter and fundraising, previously had been outsourced. A reflection of the economic times, the budget of the Association had eroded steadily in recent years, as its membership had experienced a hemorrhage of income losses and an increase in expenses. Museum visits not only statewide but nationwide, as well, had suffered a steady decline over several decades, victim to a change in the way children and adults alike spent their leisure time. It was tough enough to compete with movie theaters and television. Adding the lure and addiction of the Internet and video games exacerbated the competition.

Although many museums had a loyal following, it was difficult to keep the Association’s membership able to finance fresh exhibits that would encourage return visitors. As membership had dwindled and government subsidies had evaporated, many museums found it necessary to raise their admission fees, which fed into the cycle of declining membership.

During the latest economic turmoil, arts and education related nonprofits had suffered disproportionately from budget cuts from government, as well as cuts in grants from foundation funders. Few museums could boast of any sizeable endowments, and even those that were able to divert endowment funding to cover operational deficits recognized that it was only a temporary measure. All arts organizations and museums were at risk from a plethora of challenging crises. Energy costs had gone through the roof (literally, for those that did not have any weatherization program). This not only fattened the heating and cooling bills of facilities, but also affected the willingness of patrons to get in their cars and travel to a museum when they could stay in their homes and download a pay-on-demand movie through their cable boxes. Costs for security and insurance had skyrocketed, along with the cost of health insurance and other employee benefits. And there was nothing on the horizon that promised any relief.

Louise, herself, was often stressed out from the increasing workload. This was not fair. But it was also not a good time to be seeking another job, particularly in this field, which was clearly declining. She remembered that several years earlier, one of her board members had approached her about joining his firm as a manager in the financial services industry at a starting salary that had dwarfed her own. After a long discussion with her husband, she had decided to rebuff the offer, knowing that her heart was in the work she was doing. Whenever she had received the tuition bills from her son’s college, she had thought wistfully about the wisdom of her decision. Ironically, that board member was now unemployed after his firm had gone belly up only months before it might have benefited from federal bailout legislation promoted by an outgoing President Bush and an incoming President Obama.

Kevin waited patiently as Louise braced herself and took the call.

“Good news or bad?” Louise asked, as she picked up the telephone. Most news she had received lately had been bad, as reliable funders had dropped out with hardly a warning. Several large institutional members had indicated to her that they might need to defer this year’s dues payments to her and other associations and coalitions that they participated in to avoid laying off even more employees. At one time during the high-flying economic boom of the 1990s, the Association had employed six full-time and a couple of part-time employees. A failing economy and the loss of revenue had necessitated a slow retrenchment of spending by the Association. Two long-time employees, both of whom had been employed since its founding in 1975, had retired and were not replaced. Their duties had been absorbed by other staff.

The residual stress accruing to the organization from this response had its consequences. Louise knew that both Betty and Bill were looking for other jobs. It was not that they were disloyal; Louise conceded that she was requiring them to devote more time to the organization than they could reasonably be expected to sustain for much longer.

“Well, would you rather have the bad news first, or the really bad news?” Kevin responded. Kevin had spent most of the morning and half of the afternoon at the Capitol Building, listening to the Governor’s budget address and obtaining a hard copy of the budget proposal. All of the numbers would be posted online later in the day, but as a state association executive, Louise knew that one of her most critically important tasks was to provide information about developments to her membership as soon as possible. Nothing annoyed her more than one of her members finding out some juicy piece of information about state government from a source other than the Association.

Kevin was good at his job. He would tell her what she needed to know without any equivocation, and he knew that she would not shoot the messenger.

Louise was somewhat prepared for bad news from the Governor, who had a public face as a fiscal conservative, but who had a soft spot in his heart for funding programs that improved the quality of life for his state’s citizens, such as the arts, humanities, museums, and programs that improved the health care and education of children. The Governor, an affable, congenial man who made those around him comfortable, had four children and 12 grandchildren, which some said had a great influence on his public policy. Others attributed this warm spot he had for the arts and humanities to the fact that the State’s First Lady had been a librarian, and was a sub rosa advocate for programs that were not traditionally embraced by self-proclaimed fiscal conservatives. But having met the Governor a couple of times at ground-breaking ceremonies, Louise judged that he was a sincere supporter of museums and the educational role they play in increasing the social capital of a community.

“I already expect it will be bad,” Louise responded, “and the draft Action Alert you prepared for distribution today to the membership about the budget wasn’t very optimistic. How much do we need to change it? If I remember, we estimated a 20% cut in the line-item for museums and historical associations.”

“Well, I hope you are sitting down,” Kevin began his report via cell phone. “The bad news is that the Governor zeroed out our line-item entirely.”

“Ouch, what could be the really bad news, then?” she replied as calmly as she could, although she felt the blood rush to her head.

For a moment, she relived the feeling she had felt in February of 2009 when she read about a highly prestigious art museum in Nevada, the Las Vegas Art Museum, simply closing its doors with only a few days of public notice. At the time, many other nationally respected institutions, including the Philadelphia Museum of Art and Atlanta’s High Museum of Art, had announced severe layoffs in addition to other budget-cutting measures, but it was the emerging story in Las Vegas that had traumatized those in the “industry.” A couple of months before it had summarily closed, the board of the Las Vegas institution had instituted draconian measures intended to save the organization, which was projecting an unacceptable budget deficit. The executive director there had responded by announcing her resignation.

The Las Vegas museum had received only 3% of its budget from government funding, and at the time it had closed, membership had dwindled to only 1,000 individuals. Louise knew full well that many of her members depended on state funds for substantially more than 3% of their income. For a moment, she envisioned “Closed to the Public” signs on the front doors of constituent institutions of the Association. Unthinkable for something like that to happen on her watch!

“The Guv also zeroed out all of the earmarked grants that our members receive, including the $1 million for Harristown,” Kevin said. Harristown was the Harristown Art Museum (HAM), the largest and most prestigious art museum in the state, which provided the Association with almost 25% of its annual budget. The current chair of the board of the Association was Dr. Elizabeth Bowman, the crusty executive director of HAM. She would not be happy, and unlike Louise, the “lizard,” as Elizabeth was called behind her back, might indeed shoot the messenger who delivered bad tidings.

“The Guv basically said that he will do everything in his power not to raise taxes and to protect every existing service the state funds that directly protects the health, safety, and welfare of the state’s citizens. He not only zeroed us out, but he also zeroed out state supplemental funds to libraries, subsidies to parks, the state’s athletic programs, and the senior citizen public transportation program. And that might be the really bad news, as the General Assembly will do whatever it takes to find funds to restore the senior transportation program, for the obvious reasons.”

“What else can you tell me?” Louise prodded, holding on to her desk for support, and trying not to convey the panic that she increasingly was feeling at the moment.

“Well, I had a minute to chat with Stevens, the House Majority Whip and Williamson, the Senate Minority Leader. Both are sympathetic to restoring some of the money, and both seem to think the Governor cut us to the bone knowing full well that the Legislature would put back some money, so he could present a balanced budget. He probably won’t oppose putting all or some of our money back unless it takes something away from some other program he supports more. The problem is that the money has to be found somewhere, and most of the money the legislature had hidden away for purposes such as this were dug up from their hiding places last year when the libraries were the target of budget cuts.” He paused a moment. “And, of course, no one is suggesting raising taxes.”

Louise considered this for a moment before responding. “I remember that a nephew of the Senate Minority Leader is a curator for Harristown, and is located in the district of the House Majority Leader, who usually protects their interests. How did this happen to Harristown?”

“I don’t know for sure, but I think this may be some payback for Williamson leading the veto override fight on the Governor’s pet health care reform plan,” Kevin responded. “Look, I am still in shock about this myself. I am a bit blindsided by this, and I would have expected that my friends in the Front Office would have given me a heads up.” The “Front Office” was the term Kevin and other lobbyists used to describe the Governor’s Office.

“The Governor throws stones at the frogs in sport, but the frogs die not in sport but in earnest,” Louise mused, paraphrasing Plutarch, more to herself than to Kevin. “So, come back here as soon as you can. I need to talk to the Lizard about what we can tell the board and what we can tell the general membership about this,” Louise commanded. “I guess the only good news is that this budget is only a recommendation, and we have four months before the budget deadline to convince our friends in the Legislature that these draconian cuts simply aren’t fair. And we have to send out the Action Alert ASAP.”

Louise hung up the telephone, closed the door to her office, and took a deep breath. Although none of the funds the state made available in the Museum and Historical Commission line-item came to the Association directly, there was a general agreement among the board and its members that dues to the Association were based in large part on the state funding the Association was able to obtain. For the past several years, the line-item had received a perfunctory 2-3% cost-of-living increase, along with other line-items that did not have high visibility or a politically powerful constituency, such as programs for the aged, basic education, or subsidies for colleges and universities.

In her heart, Louise had feared that the 20% cut in funding might become reality, but the news from Kevin was far worse than even her worst-case scenario. Being zeroed out was unfathomable. She judged that the Association and its allies had enough political influence to restore some of the funds, but was it realistic to think that it was possible to get all of the money restored? Even getting the line-item restored to its funding from the previous year was a de facto cut, as inflation eroded the value of each dollar of revenue.

Louise pulled up a database on her computer that tracked political contributions made to the leadership of the State Legislature and Governor by friends and stakeholders of the Association. Impressive as it was, the current budget situation could very well trump this aspect of the Association’s power. At least, it helped Kevin get access to the movers and shakers in the Capitol to make the Association’s case one-on-one. But compared to the access provided by the telecommunications, trial lawyer, and the insurance lobbies, the influence of the entire nonprofit sector was minimal. The good news was that many individuals on Louise’s list were associated one way or the other with the powerful organizations that really ran state government. Hopefully, they could be convinced to help.

Louise knew that whereas Kevin was good at providing data and convincing arguments, public policy made in the Governor’s Mansion and the halls of the Capitol emanated more on the golf course and at $500 per plate fundraisers. Few nonprofit associations or organizations had the resources to invest in this game, and those that did represented the interests of hospitals and institutions of higher learning—certainly not museums and historical societies. Louise took it as a given that Harristown University’s state subsidy was safe from the sharp knives of state budget cutters, partly because legislative leaders and the Governor had access to a private sky box for every home game.

It occurred to Louise that the museums would have some natural allies with which to align themselves and marshal a public outcry. She took out a legal pad and started writing changes to the text of the Action Alert that would be e-mailed that afternoon with the bad news. Included in her draft was a pledge that she would do everything in her power to restore the funds, and that every stakeholder needed to pitch in to help with the coordinated advocacy effort that would be required.

As she looked down at her legal pad, she smiled through the tears.

Discussion Questions:

1. What arguments might Louise and her allies make that the state needs to support programs other than those that directly protect the health, safety, and welfare of the state’s citizens? If Louise wrote an Op-Ed article about it, what arguments might she make?

2. What are some of the advocacy activities the Association might engage in to help the cause?

3. Do you think Louise has the resources to start and build a successful coalition to restore these cuts? Could she afford not to? Discuss who might be natural coalition partners, and who might be better avoided.

4. What is the author referring to when he uses the term “social capital,” and why is this considered an important concept in the study of nonprofit management?

5. How much influence do you think personal experience of public officials (such as firsthand contact with relatives who have a disease or a particular disability) has on the execution of public policy compared to general ideology? Is it ever inappropriate to exploit the knowledge of that experience? How might that be done in this particular case?

6. What is the role of the board in helping to restore funding to the Association’s membership?

7. Is it unethical for public policymakers to take advantage of the private skybox offered by Harristown University at home football games? Why or why not?